Electronically Filed
`by Superior Court of CA,
`County of Santa Clara,
`on 8/16/2019 3:18 PM
`
`Reviewed By: R. Walker
`Case #19CV341522
`
`Envelope: 3274669
`
`1QCV341522
`Santa Clara — Civil
`
`BOTTINI & BOTTINI, INC.
`Francis A. Bottini, Jr. (SBN 175783)
`Albert Y. Chang (SBN 296065)
`Yury A. Kolesnikov (SBN 271173)
`7817 Ivanhoe Avenue, Suite 102
`
`La Jolla, California 92037
`
`Telephone: (858) 914-2001
`Facsimile: (858) 914-2002
`Email: fbottini@b0ttinilaw.com
`achang@bottini1aw.com
`ykolesnikov@bottini1aw.com
`
`COHEN MILSTEIN SELLERS & TOLL PLLC
`
`Julie Goldsmith Reiser (pro hac vice)
`Molly Bowen (pro hac viceforthcoming)
`1100 New York Avenue, N.W., Suite 500
`Washington, DC. 20005
`Telephone: (202) 408—4600
`Facsimile: (202) 408-4699
`Email: jreiser@cohenmi1stein.com
`mbowen@cohenmilstein.com
`
`Co-Lead Counselfor Plaintiffs
`
`[Additional Counsel on Signature Page]
`
`SUPERIOR COURT OF THE STATE OF CALIFORNIA
`IN AND FOR THE COUNTY OF SANTA CLARA
`
`IN RE ALPHABET INC. SHAREHOLDER
`DERIVATIVE LITIGATION
`
`
`
`
`This Document Relates to:
`
`DEMAND FUTILITY ACTION
`
`Lead Case No. 19CV341522
`
`CONSOLIDATED
`STOCKHOLDER DERIVATIVE
`COMPLAINT FOR:
`
`(1) BREACH OF FIDUCIARY DUTY;
`(2) UNJUST ENRICHMENT;
`(3) CORPORATE WASTE; and
`(4) ABUSE OF CONTROL
`
`JURY TRIAL DEMANDED
`
`PUBLIC - REDACTS MATERIALS FROM CONDITIONALLY SEALED RECORD
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`CONSOLIDATED STOCKHOLDER DERIVATIVE COMPLAINT
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`TABLE OF CONTENTS
`
`INTRODUCTION ...................................................................................................... 2
`
`JURISDICTION AND VENUE ............................................................................... l l
`
`PARTIES .................................................................................................................. 1 1
`
`A.
`
`B.
`
`C.
`
`Lead Plaintiffs ............................................................................................... l l
`
`Defendants ..................................................................................................... 13
`
`Doe Defendants ............................................................................................. 22
`
`FACTUAL ALLEGATIONS ................................................................................... 23
`
`A.
`
`B.
`
`Alphabet’s Reputation as a “Good” Company is Key to Recruiting
`Valuable Employees and Collecting the User Data that Powers Its
`Products ......................................................................................................... 23
`
`Defendants Breached their Fiduciary Duties by Protecting and
`Rewarding Male Harassers ............................................................................ 25
`
`l.
`
`Defendants Brin and Page, the Company’s Co-Founders, as
`Well as Other Senior Executives, Set the Tone at the Top by
`Dating Female Subordinates .............................................................. 25
`
`C.
`
`The Individual Defendants Tolerated Persistent Misconduct from
`Andy Rubin Throughout His Tenure at Google ............................................ 28
`
`1.
`
`2.
`
`3.
`
`4.
`
`Following the example of other senior leadership at the
`Company, Rubin had extramarital relationships with female
`employees, culminating in an allegation of sexual harassment. ........ 31
`
`The Board Pays Rubin an Excessive Severance Package
`Despite Finding Sexual Harassment Allegations against him
`were Credible. .................................................................................... 31
`
`Defendants’ Culture of Concealment Continued Even After a
`News Report Surfaced That Suggested Impropriety by Rubin .......... 35
`
`The Board of Directors’ and Other Defendants’ Active, Direct,
`and Intentional Role in the Wrongful Conduct Surrounding
`Rubin’s Departure .............................................................................. 36
`
`Google Paid Another Executive, Amit Singhal, Millions After He
`Sexually Harassed Google Employees .......................................................... 38
`
`Google Asked Other Victims of Sexual Harassment to “Stay Quiet”
`After Their Allegations of Harassment Were Found to Be Credible
`and May have Paid Off Other Executives ..................................................... 40
`
`The Rubin and Singhal Scandals Epitomize the Hostile Workplace
`Environment that the Alphabet Board has allowed to Fester for years ......... 42
`
`D.
`
`E.
`
`F.
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`l.
`
`2.
`
`Alphabet’s Pervasive Sex Stereotyping and Sexual Harassment ....... 43
`
`Alphabet’s Systemic Sex Discrimination in Pay and
`Promotions .......................................................................................... 45
`
`G.
`
`H.
`
`Alphabet Employees and Shareholders Express Outrage at the
`Board’s Protection of Male Executives ......................................................... 49
`
`Defendants Breached their Fiduciary Duties by Hiding the Google+
`Breach from the Public .................................................................................. 55
`
`l.
`
`2.
`
`3.
`
`Alphabet’s History of Concealing Data Privacy Issues Had
`Already Resulted in Heightened Legal Scrutiny and Penalties ......... 56
`
`The WSJ reveals Defendants breached their fiduciary duties to
`the Company and their legal obligations by knowingly
`concealing the Google+ breach to avoid regulatory scrutiny............. 57
`
`Lawmakers Investigate Whether Alphabet’s Concealment
`Violates the FTC Consent Decree or Other Data Protection
`Laws ................................................................................................... 61
`
`I.
`
`Defendant Schmidt Leaves the Board ........................................................... 64
`
`THE INDIVIDUAL DEFENDANTS BREACHED THEIR FIDUCIARY
`DUTIES .................................................................................................................... 65
`
`A.
`
`The Individual Defendants Breached Their Fiduciary Duties to the
`Company........................................................................................................ 66
`
`The Individual Defendants Breached their Duty of Good Faith ................... 66
`
`The Individual Defendants Violated Google’s Corporate Governance
`Guidelines ...................................................................................................... 68
`
`The Individual Defendants Violated Google’s Code of Conduct by
`Permitting the Company to Engage in Unlawful Acts .................................. 69
`
`The Audit Committee Defendants Breached the Duties Imposed by
`the Audit Committee Charter by Permitting Alphabet to Engage in
`Conduct in Violation of the Law ................................................................... 70
`
`The Leadership Development and Compensation Committee
`Defendants Breached the Duties Imposed by the Leadership
`Development and Compensation Committee Charter by Approving
`Severance Payouts to Executives Who Should Have Been Terminated
`for Cause ........................................................................................................ 71
`
`The Governance Committee Defendants Breached the Duties Imposed
`by the Governance Committee Charter ......................................................... 72
`
`The Director Defendants Caused Google to File Misleading Financial
`Statements With the SEC .............................................................................. 74
`
`Conspiracy, Aiding and Abetting, and Concerted Action ............................. 78
`-11-
`CONSOLIDATED STOCKHOLDER DERIVATIVE COMPLAINT
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`

`

`VI.
`
`DAMAGES TO THE COMPANY .......................................................................... 79
`
`A.
`
`B.
`
`C.
`
`D.
`
`E.
`
`F.
`
`Damages From the Unlawful Severance Payments to Rubin and
`Singhal ........................................................................................................... 79
`
`Costs to Defend the Securities Fraud Class Action Lawsuit ......................... 80
`
`Sexual Harassment, Discrimination, and Retaliation .................................... 80
`
`Data Privacy .................................................................................................. 81
`
`Legal and Regulatory Penalties ..................................................................... 82
`
`Reputation, Goodwill, and Workplace Harm ................................................ 82
`
`VII. DERIVATIVE ALLEGATIONS ............................................................................. 84
`
`VIII. DEMAND F UTILITY ALLEGATIONS ................................................................. 85
`
`A.
`
`B.
`
`C.
`
`D.
`
`Demand is Excused Because Each Member of the Board Faces a
`Substantial Likelihood of Liability ................................................................ 85
`
`Demand is Futile Because a Majority of the Board Completely
`Abdicated Its Fiduciary Duties ...................................................................... 89
`
`Demand is Excused Because a Majority of the Board is Not
`Independent ................................................................................................... 90
`
`Demand is Excused Because the Board is Entirely Controlled by
`Defendants Page and Erin ............................................................................. 97
`
`IX.
`
`THE STATUTE OF LIMITATIONS DOES NOT BAR LEAD
`
`PLAINTIFFS’ CLAIMS, OR, ALTERNATIVELY, WAS TOLLED .................. 101
`
`FIRST CAUSE OF ACTION ............................................................................................ 101
`
`SECOND CAUSE OF ACTION ....................................................................................... 103
`
`THIRD CAUSE OF ACTION ........................................................................................... 104
`
`FOURTH CAUSE OF ACTION ....................................................................................... 104
`
`PRAYER FOR RELIEF .................................................................................................... 105
`
`JURY DEMAND ............................................................................................................... 106
`
`
`-iii-
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`Lead Plaintiffs Northern California Pipe Trades Pension Plan (“NCPTPP”), Teamsters Local
`
`272 Labor Management Pension Fund (“Local 272”), and James Martin (“Martin,” and collectively
`
`“Lead Plaintiffs”) bring this stockholder derivative action on behalf of nominal defendant Alphabet,
`
`Inc. (“Alphabet,” “Google,” or the “Company”1) against certain current officers and directors of the
`
`Company for breaches of fiduciary duty and a “culture of concealment” that led Defendants, in
`
`pursuit of their own interests, to participate or acquiesce in the cover-ups of a long-standing pattern
`
`of sexual harassment and discrimination by high—powered male executives as well as a serious data
`
`breach, both of which were in violation of state and federal
`
`law. These breaches included
`
`participating and/or acquiescing in the creation of a culture that fostered and covered-up a long—
`
`standing pattern of sexual harassment and discrimination by high—powered male executives as well
`
`as a serious data breach, both of which were in violation of state and federal law, a consent decree
`
`between the Company and the FTC, and Alphabet’s own code of conduct.
`
`Lead Plaintiffs make these allegations upon personal knowledge as to their own actions and,
`
`as to all other matters, upon the investigation of their undersigned counsel which included, among
`
`other things, (1) review and analysis of Alphabet’s public filings with the US. Securities and
`
`Exchange Commission (“SEC”); (2) a review of documents produced by Alphabet in response to
`
`Lead Plaintiffs’ shareholder inspection demands; (3) a review of press releases, news articles, and
`
`other public statements issued by or concerning Alphabet and the Individual Defendants named
`
`herein; and (4) a review of court records, including, but not limited to, pleadings filed in Ellis v.
`
`Google, LLC, N0. CGC-l7-561299 (Cal. Sup. Ct. San Francisco Cty.); Wicks v. Alphabet, Inc, No.
`
`3:18-CV-6245 (N.D. Cal); El Mawardy v. Alphabet, Inc, No. 1:18-CV-5704 (E.D.N.Y.); Matic v.
`
`Google, LLC, No. 5:18—cv6164 (N.D. Cal); Patacsil v. Google, LLC, No. 5:18—cv—5062—EJD (N.D.
`
`Cal); Lee v. Google, Inc, Case No. 18-cv-323651 (Cal. Super. Ct. Santa Clara Cty.); Rubin v.
`
`Peters, et. al., Case No. 18-cv-05380 (Cal. Super Ct. San Mateo Cty.); Oflice ofFederal Contract
`
`
`
`1 On August 10, 2015, Google announced plans to restructure its subsidiaries into holding company
`Alphabet, Inc. That process was completed on October 2, 2015. Certain of the events discussed
`herein occurred prior to the name change. Accordingly, Alphabet, Google and the Company are
`used interchangeably.
`
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`Compliance Programs, US. Dep’t of Labor v. Google, Inc, ALJ Case No. 2017—OFC—08004,
`
`(“DOL”); as well as the complaints filed in the actions consolidated with this case. Lead Plaintiffs
`
`believe that substantial additional evidentiary support will exist for the allegations set forth below
`
`after a reasonable opportunity for discovery. On behalf of themselves and the stockholders they seek
`
`to represent, Lead Plaintiffs allege as follows:
`
`I.
`
`INTRODUCTION
`
`1.
`
`This is a stockholder derivative action brought on behalf of Nominal Defendant
`
`Alphabet, alleging breaches of fiduciary duty by certain of the Company’s current and former Board
`
`members and officers2 occurring from at least 2013 through the present (the “Relevant Period”),
`
`based on a pattern of concealment intended to protect the interests of the Company’s top earning
`
`executives and the Board at the expense of its shareholders, employees, and users. It has come to
`
`light that, in at least two areas of its responsibility—employment policies and data privacy, the
`
`Board knowingly participated in or acquiesced to conduct by the Company’s senior executives that
`
`caused the Company to Violate various laws. In both areas, the Board knew of the implications of
`
`2 The directors at the time that the initial complaint was filed —which is the relevant board for the
`purposes of assessing demand futility—were: Chairman John L. Hennessy (“Hennessy”); L. John
`Doerr (“Doerr”); Alan R. Mulally (“Mulally”); Kavitark Ram Shriram (“Shriram”); Lawrence E.
`Page (“Page”); Sergey Brin (“Brin”); Ann Mather (“Mather”); Roger W. Ferguson, Jr. (“Ferguson”);
`Sundar Pichai (“Pichai”); Eric Emerson Schmidt (“Schmidt”), and Diane Greene (“Greene”). These
`individuals are collectively referred to as the “Board.”
`
`Since the initial complaint was filed, Schmidt has chosen not to stand for reelection and Robin
`Washington has replaced Greene on the Board. Shirley M. Tilghman (“Tilghman”) was also a Board
`Member during the relevant period, and, together with the Board, these individuals are referred to
`as the “Director Defendants.”
`
`Page is Alphabet’s Chief Executive Officer (“CEO”) and a co—founder of the Company. Brin is
`Alphabet’s President and the other co-founder of the Company. Pichai and Schmidt serve as Google
`CEO and Technical Advisor, respectively. David C. Drummond (“Drummond”) is the Company’s
`Chief Legal Officer (“CLO”). In addition, Andrew Rubin (“Rubin”) and Amit Singhal (“Singhal”)
`both served as Senior Vice Presidents when they were asked to leave the Company following
`credible allegations of sexual harassment against them, and Lazlo Bock (“Bock”) was the Senior
`Vice President of People & Operations at Google, Inc., during the relevant period. These individuals
`are collectively referred to as the “Officer Defendants.”
`
`The Officer Defendants and the Director Defendants are collectively referred to as the “Individual
`Defendants,” and, together with the Company, are referred to as “Defendants.”
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`its actions, or failure to act because similar conduct had already drawn regulatory scrutiny, lawsuits,
`
`and public criticism. As a result of the underlying misconduct,
`
`the active cover-ups of the
`
`misconduct, and retaliation against those who sought to raise awareness about these issues,
`
`stockholders and the Company have been damaged financially and reputationally. Defendants’
`
`misconduct has already cost the Company hundreds of millions of dollars in exit packages to
`
`wrongdoers and exposed it to further litigation and a loss of federal contracts over its hostile and
`
`discriminatory workplace. Further, as studies have shown, such a toxic work environment can
`
`impact a Company’s ability to hire and retain top talent. Defendants’ misconduct in the data privacy
`
`arena has also led to a loss of user trust and goodwill that is essential to any data-driven company,
`
`and exposed the Company to potential loss of business, political repercussions, and the related costs
`
`of defending claims and investigations by a rising number of government agencies.
`
`2.
`
`For instance, as confirmed by an October 25, 2018 article in The New York Times
`
`(the “Times” or “NY7’), the Individual Defendants knew about sexual harassment by numerous
`
`senior Google executives, including defendant Andy Rubin (the creator of Android mobile software)
`
`and Amit Singhal
`
`(another senior executive), against whom credible allegations of sexual
`
`misconduct were confirmed through an internal investigation.3 Instead of disciplining these senior
`
`executives, however,
`
`the Individual Defendants awarded these executives with lucrative exit
`
`packages and concealed their harassment.
`
`3.
`
`Rather than firing Rubin for cause, Brin and Page gave him a hero’s farewell.
`
`Together with other members of Alphabet’s Board of Directors (the “Board”), Brin and Page
`
`allowed Rubin to resign and approved a $90 million “exit package.” No mention was made about
`
`the true reason for Rubin’s “resignation” — his egregious sexual harassment while at Google.
`
`Instead, Page said in a public statement: “I want to wish Andy all the best with what’s next.” Worse
`
`yet, Mr. Rubin left, Google invested millions of dollars in his next venture.
`
`
`
`3 See Daisuke Wakabayashi & Katie Benner, How Google Protected Andy Rubin, the ‘Father of
`Android ’,
`The
`New
`York
`Times
`(Oct.
`25 ,
`2018),
`https://www.nytimes.com/2O l 8/ l O/25/technology/google-sexual-harassment-andy—rubin.html.
`
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`4.
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`Similarly, Amit Singhal, a senior executive at Google, was allowed to quietly resign
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`from Google in 2016 in the wake of credible allegations of sexual harassment, and was paid tens of
`
`millions in severance. Against the backdrop that neither Google nor Singhal disclosed the basis for
`
`Singhal’s “resignation,” Uber then hired him. In February 2017, however, Uber fired Singhal for
`
`failing to disclose the credible allegations of sexual harassment While at Google.
`
`5.
`
`These are just a few examples ofhow the Directors’ wrongful conduct allowed illegal
`
`employment practices to continue. As set forth below, both in the area of employment and data
`
`protection, the Board violated California law, federal law, its consent decree with the FTC and its
`
`own ethical standards and guidelines.
`
`6.
`
`Alphabet was incorporated in 2015 and is the parent company of its leading
`
`subsidiary Google Inc., among others. Google was founded in 1998. Alphabet and Google are
`
`headquartered in Mountain View, California. The Company’s common stock trades on the
`
`NASDAQ Global Select Market (“NASDAQ”) under the ticker symbol “GOOGL,” which
`
`represents Class A shares, and “GOOG,” which represents non-voting Class C shares. The Company
`
`also offers Class B shares with 10:1 voting power, which are not publicly traded.
`
`7.
`
`Alphabet is a male—dominated company with a male—dominated culture, like the tech
`
`industry at large. Numerous critics have argued over the years that the gender imbalance in the tech
`
`industry is not just the result of a “pipeline” problem: persistent sexism and discrimination have
`
`kept women out, held them back and, ultimately, forced them to leave the industry altogether.4
`
`8.
`
`Alphabet’s leadership in the tech industry regrettably also includes leadership in a
`
`culture that discriminates against women. Recent complaints about the Company demonstrate that,
`
`for years, Alphabet’s management has fostered a “brogrammer” culture, where women are sexually
`
`harassed and valued less than their male counterparts. Although Alphabet superficially enforces its
`
`4 David Goldman, Few Female Engineers and Execs at Google, CNN Business (May 30, 2014),
`https://money.cnn.com/20l4/05/29/technology/google-women/index.html. See also Liza Mundy,
`Why
`is
`Silicon
`Valley
`So Awful
`to Women?,
`The Atlantic
`(Apr.
`2017),
`https://www.theatlantic.com/magazine/archive/ZO l 7/04/why—is—silic0n—valley—so—awful—to—
`women/517788l.
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`anti—harassment policies in token cases, reports indicate that
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`the Company’s procedures for
`
`investigating complaints about sexual harassment and discrimination are grossly inadequate. For
`
`instance, current and former employees told the Times that “complainants are often not told about
`
`the details of subsequent
`
`investigations.”5 And, Alphabet’s former policy of forcing sexual
`
`harassment claims against the Company into arbitration, helped to keep formal challenges to those
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`policies out of the public eye.
`
`9.
`
`Touting its mottos of “Don’t Be Evil” and “Do the Right Thing,” Google frequently
`
`states that the Board is held to the highest level of ethics. However, in practice, under the Individual
`
`Defendants’ leadership, Alphabet employed a dual and contradictory standard: If facing allegations
`
`about a high—level male executive at Google responsible for generating millions of dollars in
`
`revenue, Google would look the other way. And if caught, Google would quietly allow the male
`
`executive to resign, paying tens of millions of dollars to make the problem go away.
`
`10.
`
`On the other hand, for its low—level employees, Google acted more decisively, firing
`
`for cause and without golden parachutes. In this way, Alphabet and the Board maintained superficial
`
`compliance with its code of conduct, internal rules, and laws regarding sexual harassment. By
`
`appearing to take decisive action against a significant number of low—level employees, the Board
`
`hoped to avoid a much bigger scandal.
`
`11.
`
`As one current Alphabet employee succinctly put it:
`
`it
`When Google covers up harassment and passes the trash,
`contributes to an environment where people don’t feel safe reporting
`misconduct. They suspect that nothing will happen or, worse, that the
`men will be paid and the women will be pushed aside.6
`
`5 Kate Conger & Daisuke Wakabayashi, Google Overhauls Sexual Misconduct Policy After
`Employee
`Walkout,
`The
`New
`York
`Times
`(Nov.
`8,
`2018),
`https://www.nytimes.com/20l 8/1 1/08/technology/google-arbitration-sexual-harassment.html.
`
`6 Isobel Asher Hamilton, ‘Google covers up harassment and passes the trash A Google engineer
`gave her employer both barrels after an explosive sexual misconduct report, Business Insider (Oct.
`26,
`2018),
`https://finance.yahoo.com/news/apos-google-covers-harassment-passes-
`105957937.html.
`
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`12.
`
`Alphabet has also struggled with other indicators of sex discrimination in its
`
`workplace. A class action filed in the Superior Court of San Francisco on behalf of female Google
`
`employees employed in California, where the Company has its headquarters, asserts that the
`
`Company persistently discriminates against women by, among other things, assigning them to jobs
`
`in lower compensation “bands” than similarly situated men, promoting women more slowly and at
`
`lower rates than similarly situated men, and simply paying women less. On March 27, 2018, the
`
`Court found that the plaintiffs alleged sufficient facts to state a claim for intentional discrimination.7
`
`13.
`
`The Ellis class action lawsuit was filed following news of a 2015 audit of Google’s
`
`headquarters by the Department of Labor, which similarly revealed “systemic compensation
`
`disparities against women pretty much across the entire workforce.”8 While the investigation is still
`
`ongoing, Alphabet has been aggressive in resisting some of the agency’s requests for information
`
`and has also sought to restrict media access to the proceedings.9
`
`14.
`
`Accordingly, Alphabet was already facing scmtiny regarding its treatment of women
`
`and its procedures for addressing sex discrimination when the NYT published an article exposing
`
`Alphabet’s concealment of its payouts to high-level male executives who had been credibly accused
`
`of sexual harassment.
`
`15.
`
`The practices described in the NYT article—which epitomize the Company’s cultural
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`complacency concerning credible accounts of unlawful sex-discrimination—prompted immediate
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`employee outrage. But instead of acting quickly to respond to employees’ concerns, Alphabet
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`management’s “dismissive” response sparked a historic reaction:10 on November 1, 2018, 20,000
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`7 Ellis v. Google, LLC, No. CGC-l7-561299 (Cal. Sup. Ct. San Francisco Cty.).
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`8 US. Department of Labor (“DOL”) Recommended Decision and Order dated Jul. 14, 2017, at p. 9.
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`9 Sam Levin, Revealed: Google Tried to Block Media Coverage of Gender Discrimination Case,
`The Guardian (May 22, 2017), https://www.theguardian.com/technology/2017/may/22/google—
`gender-discrimination-case-reporting-restricted.
`
`10 Isobel Asher Hamilton, A Googler Vividly Described the ‘Disastrous ’ Leadership Meeting that
`Sparked a Giant Protest Over Sexual Misconduct, Business
`Insider
`(Nov. 21, 2018),
`https://www.businessinsider.in/a—googler—vividly—described—the—disastrous—1eadership—meeting—
`that-sparked-a—giant-protest-over-sexual-misconduct/articleshow/6673 8 76 8.cms.
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`Alphabet employees around the globe staged a “Google Walkout” to protest the events described in
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`the article as well as the Company’s generally inadequate approach to sexual harassment and
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`discrimination in its workforce. As one supporter of the Walkout tweeted, “Why do they think it’s
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`OK to reward perpetrators & further violate victims? #MeToo.”11 Other protestors held signs
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`admonishing Google, “Don’t be evil, protect victims, not harassers.”1 2 Since the Walkout, and under
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`significant public pressure, the Board has taken small steps to address its previous failures. But, as
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`described below, these belated, reactive actions—which apply only prospectively—are insufficient
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`to remedy the harms that have already been done and fail to address the systemic, cultural problems
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`including pay inequity and discrimination that the Board has long permitted to fester at Alphabet.
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`16.
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`Underscoring the inadequacy of the Company’s response, several organizers of the
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`Walkout claimed they faced retaliation as a result of their participation in the event, prompting over
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`a thousand Alphabet employees to hold a “sit in” protest at the Company just six months later.
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`17. Workplace fairness is not the only problem Alphabet’s leaders have actively swept
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`under the rug. Three weeks before the NYT issued its report, an explosive article published on
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`October 8, 2018 in The Wall Street Journal (“ WSJ”) revealed a data privacy breach that exposed the
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`personal data of half a million users of Goog1e+, a social networking website operated by the
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`Company, to unauthorized access. 13 Although the breach was discovered and remedied by the
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`Company in March 2018, Alphabet chose not to alert Google+ users that their data was exposed to
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`unauthorized app developers. As detailed by the WSJ, an internal Alphabet memo “shared with
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`senior executives,” including Defendant Pichai, “warned that disclosing the incident would likely
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`11Matthew Weaver, Alex Hem, Victoria Bekiempis, Lauren Hepler, & Jose Fermoso, Google
`walkout: global protests after sexual misconduct allegations, The Guardian (NOV. 1, 2018),
`https://www.theguardian.com/technology/20 1 8/nov/0 1/google—walkout—global—protests—
`employees-sexual-harassment-scandals.
`
`12 Daisuke Wakabayashi, Erin Griffith, Amie Tsang, & Kate Conger, Google Walkout: Employees
`Stage Protest Over Handling of Sexual Harassment, The New York Times (NOV. 1, 2018),
`https://www.nytimes.com/2018/1 1/01/technology/google—walkout—sexual—harassment.html.
`
`13 Douglas MacMillan & Robert MacMillan, Google Exposed User Data, Feared Repercussions of
`Disclosing to Public, The Wall Street Journal (Oct. 8, 2018), https://www.wsj.com/articles/google-
`exposed-user—data—feared-repercussions-of—disclosing-to-public-l 53901 71 94.
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`trigger ‘immediate regulatory interest.
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`Thus, in order to avoid regulatory and public scrutiny,
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`3”
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`Defendants hid the breach from the public and from Alphabet shareholders.
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`18.
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`The Board was well-aware of the consequences of failing to disclose the Google+
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`breach—indeed, this was the Company’s fourth major set of misrepresentations on data privacy in
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`the past eight years. In 2011, Alphabet entered into a consent decree (the “Consent Decree”) with
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`the Federal Trade Commission (“FTC”) after Alphabet made misrepresentations concerning the
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`launch of a social networking tool. In 2012, the FTC fined the Company $22.5 million for violating
`
`the Consent Decree by misrepresenting its use of cookies. And just a few months before the Google+
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`revelation, in August 2018, the Associated Press (“AP”) published a report revealing that Google
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`had provided misleading information regarding how and whether users of its mobile devices and
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`apps could turn off location tracking, and when and how the Company deceptively permitted
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`location data to be stored and used, prompting criticism from federal lawmakers and a class action
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`consumer protection suit. See Patacsil v. Google, LLC, No. 5:18—cv—5062—EJD (N .D. Cal.).
`
`19.
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`Following the Wst revelation of the Google+ breach, several United States
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`Senators expressed their concerns in a letter to Defendant Pichai and asked the FTC to investigate
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`“whether the Google+ incident constitutes a breach of the company’s consent decree or other
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`commitments, and more broadly whether Google has engaged in deceptive acts and practices with
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`respect to privacy.” International Regulators, including authorities in Germany and Ireland, as well
`
`as the Attorneys General for the States of New York and Connecticut, are also investigating the
`
`breach. And shareholders have filed securities fraud claims, alleging that
`
`the Company’s
`
`concealment of the Google+ breach violated federal securities laws. See Wicks v. Alphabet, Inc,
`
`No. 3:18—cv—6245 (N.D. Cal.); El Mawardy v. Alphabet, Inc, No. 1:18—cv—5704 (E.D.N.Y.).
`
`20.
`
`In their letter urging the FTC to investigate the circumstances of the Google+ breach,
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`one group of Senators aptly characterized the fundamental problem that created both instances of
`
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`misconduct described in this complaint: “The awareness and approval by Google management not
`
`to disclose represents a culture of concealment and opacity set from the top of the company.”14
`
`21.
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`Defendants’ active participation in that wrongdoing—which allowed them to
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`prioritize their own interests, and those of the Company’s powerful male executives, over their legal
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`obligations—caused the Company significant harm. Revelations of the Defendants’ misconduct led
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`the Company’s stock price to immediately drop approximately 6% in response to the WSJ article
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`followed by another immediate 7% decline in response to the Times article; prompted lawmaker
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`scrutiny, regulatory investigations, and shareholder, consumer, and employee lawsuits; and has
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`drawn massive outrage from the Company’s valuable employees. The Board’s misconduct will
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`continue to result in the loss of business and goodwill, both as a result of the negative publicity
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`around these incidents, and the increasing loss of trust in the Google brand.
`
`22.
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`The Individual Defendants’ misconduct, as set forth below, constitutes bad